Market Report: Conglomerate image hammers BTR to four-year low
Friday 14 June 1996
The shares were knocked 3.5p to 265.5p in busy trading. But it was the 1995/96 warrants that demonstrated just how disenchanted the stock market has become with the group born out of the old Birmingham Tyre & Rubber Co.
The warrants, once 140p, fell to a 14p low. They are bordering on worthless, offering the holders the right to subscribe for a new share at 258p in the 30 days following September's interim report.
There is no doubt that BTR, which indulged in an old-fashioned takeover spree in the days when conglomerates enjoyed glamour status, had factored in the benefits of the warrants in its cash projections.
From the 1995/96 warrants still outstanding it could have expected an inflow of around pounds 240m.
The weakening shares must put a question mark over the group's chances of such a windfall. Even the 1997 warrants, down to a low of 25.5p look perilously close to the borderline with their pounds 350m injection in jeopardy.
And 1998 warrants, at 8p with a switch price of 405p, are either one of the best bets in the market or a dead loss.
For years BTR's profits moved majestically ahead although last year's peak of pounds 1.5bn was rather less than expected. Profit warnings, a hitherto unheard of event, have come to be an unwelcome part of BTR life.
Last month came the second in six months when the company said half-year operating profit would be lower. Since then the share decline has been ominous.
Suggestions that year's profits will emerge at around pounds 1.38bn are one of the eroding influences. There is also a growing feeling BTR should do a Hanson - admit the conglomerate days are numbered and shoot for a break-up deal. However Hanson's obvious difficulties in convincing the market about the merits of its demerger could be enough to prompt BTR's new chief executive, Ian Stachan recruited from the RTZ resources giant, to face it out and stick with the conglomerate philosophy.
The rest of the stock market had an uneventful session with a three-day winning run coming to an end as the FT-SE 100 index fell 7.5 points at 3,761.7.
The projected Footsie newcomers achieved modest celebratory gains. Orange, which has yet to make a profit, rose 3p to 252.5p; Next 2p to 558p and United News & Media ended just 1p higher at 707p.
Asda enjoyed a lively session, closing 2.75p firmer at 120.75p after the latest survey from the AGB research group showed it was the best performing superstore chain. Tony MacNeary at NatWest Securities said the display was "stunning". J Sainsbury, once invincible, was the worst-performing company.
Arjo Wiggins Appleton, the paper group, rose 4.5p to 189p on rumoured Cazenove support but Cookson, the industrial materials group, gave up 13p to 307p as Henderson Crosthwaite nudged its forecast down by pounds 5m to pounds 210m. The securities house believes the shares are a buy below 300p.
Prudential Corporation improved 6.5p to 418.5p as SBC Warburg offered support following an investment presentation and Glaxo Wellcome continued to score from the Barclays de Zoete Wedd re-rating.
Vickers, ahead of a presentation last night, firmed 1p to 253p. The growing hostility between British Gas and its regulator left the shares 4p down at 187.5p. Other utilities were weak with Yorkshire Electricity, figures today, off 12p at 744p.
Treats, the iced lolly maker, ended at 176p against a 174p placing. A dull performance compared with many new issues but it could be argued the sponsoring stockbroker, Henderson Crosthwaite, priced the shares rather more accurately than when there is a soar-away reaction.
Polymasc Pharmaceuticals fell 5p to 169p despite a positive presentation. A spin-off from London's Royal Free Hospital medical school, it arrived late last year at 100p.
The company, it seems, is scheduled to make a smaller loss than forecast, around pounds 350,000 against pounds 600,000. A licence agreement should be clinched with a US group soon which could bring in around pounds 500,000.
Polymasc is experiencing a rush of outside interest following its appearance on AIM and has registered more patents in six months than in the previous three years when it was a Royal Free branch. With pounds 3.6m in the bank it is one of the biobabes not in desperate need of new cash.
As Voltaire once said, “Ice cream is exquisite. What a pity it isn’t illegal”
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